R&D Tax Alert - July 2017

July 2017

Illinois Reinstates Research Tax Credit Effective Immediately


On July 6, the State of Illinois passed Public Act 100-0022, reinstating its Research and Development Tax Credit (“R&D Credit”) for tax years ending after December 31, 2015 through tax years ending before January 1, 2022.
Similar to prior years, the credit is equal to 6.5 percent of the difference between the credit year state qualifying expenditures and the average of the prior three year state qualifying expenditures. Any credit in excess of the tax liability for the taxable year may be carried forward for up to five taxable years.
Qualifying expenditures include wage, contractor, and supply expenses related to a business’ attempts to develop or improve the functionality or performance of its products, manufacturing processes, software, or other components.

BDO Insights

Although Illinois’ 6.5 percent R&D Credit doesn’t match neighboring Indiana’s 15 percent, its reenactment will help many of Illinois’ resident businesses and business owners offset some of the tax increases Public Act 100-0022 also provided. Under the new law, individual and corporate income tax rates will rise, from 3.75 percent to 4.95 percent and 5.25 percent to 7.0 percent, respectively. These changes are effective as of July 1, 2017.
The forms on which taxpayers may claim the R&D Credit, Schedules 1299-A and 1299-D, have not yet been updated to reflect the new law, but they are expected to be updated shortly.